Don’t let financial planning myths hinder you
Randall Anthony Communications Inc.
Has one of these myths been keeping you from taking control of your financial future and achieving your dreams?
Myth 1: It’s too late to start now
“You often hear people saying it’s too late to start planning,” says Al Nagy, CFP, senior executive, financial consultant with Investors Group, Edmonton, “But I often find that the real reason they aren’t saving is that they’ve been procrastinating.”
To which the obvious response is: if not now, when?
“The sooner you break the procrastination logjam, the sooner you can develop good financial planning habits and start saving for your retirement,” he says.
Individuals approaching retirement have a unique and critical set of financial planning needs that should be addressed to ensure that they don’t outlast their income or pay more tax than they have to.
Conversely, younger individuals may fall into the trap of believing they have lots of time to get started, but it’s important to remember that, at any age, time is an asset: the sooner you start, the harder time works for you.
Myth 2: I don’t have any spare cash to stash
Mr. Nagy says cash-flow analyses invariably unearth “hidden money” that can redirected into savings.
It’s all about priorities, adds Cynthia Kett, CFP, of Stewart & Kett Financial Advisors Inc. in Toronto.
“Take a hard look at where the money is going,” she says. “Most of us tend to over-consume, buying things we don’t need instead of investing in our future. How would you like to be able to take off one year for every four years you work? That’s exactly what you can do by investing 18 per cent of your gross income.”
Myth 3: I already have a pension from work
As for relying on a work-based pension, don’t do it — there are too many “if’s,” says Ms. Kett. What if the company fails, benefits are cut, the plan changes from defined benefits to defined contributions, you leave the employer or you get a divorce and have to split the proceeds with your ex? Having a pension is nice, but it’s a bet worth hedging.
Myth 4: Good financial planning advice is too expensive
Whatever your income level or life stage, there are many different advice offerings that could fit into your budget. The reality is good advice from a qualified professional will often pay for itself over the long term.
Myth 5: I can do it myself
Looking after your finances effectively requires a great deal of knowledge about a wide variety of financial topics, as well as a lot of time and attention to detail — all things that, in today’s fast-paced world, most people don’t have. But this is something that you can easily get help with. “You can walk off the street into most banks and receive financial advice at no charge,” says Scott Ellison, CFP, portfolio manager and investment advisor, TD Waterhouse in Halifax.
Whether faced with a big decision about your mortgage, making changes to your will, or converting your RRSPs to RRIFs, it is good to have someone on your side to discuss implications with. “An advisor can also help eliminate emotional reactions to the market and rebalance portfolios when necessary,” he says. “We’re the place of sober second thought.”
So … if not now, when?